"The DOJ has finally confirmed what we believed in Illinois to be true all along — that intrastate gambling is an issue that is within the sole discretion of a state to regulate, as it deems appropriate," said Melissa Riahei,
general counsel of the online gaming firm U.S. Digital Gaming.

"This is wonderful Christmas gift to state governments nationwide. States can now comfortably move toward the implementation of Internet gaming programs that can generate much-needed revenue to fund essential government services."

Online gaming has become a hot topic on Capitol Hill since the Obama administration moved to shut down most of the online poker industry earlier this year. The House Energy and Commerce Committee has held several hearings on the issue and Reid is believed to strongly support Internet gambling.

One bill under consideration would allow online poker with federal regulation and has drawn strong opposition from state lottery organizations, which argue they should have complete control over any gaming within their borders. States argue a federal law could sap revenue from their budgets.

The casino industry was less pleased with the Justice Department's shift in stance, arguing it opens the door for a number of unregulated gaming websites without consistent safeguards against fraud and money-laundering.

"Federal legislation that protects states’ rights can establish uniform safeguards to protect U.S. consumers, keep children from gambling on the Internet, and provide the tools law enforcement needs to shut down illegal Internet gambling operators," said the American Gaming Association in a statement.

"Federal guidelines also would prevent fraud and money laundering, address problem gambling and ensure players aren’t being cheated. These federally mandated protections are vital no matter the interpretation of the Wire Act, and they must be enacted in order to avoid a patchwork quilt of state and tribal rules and regulations that would prove confusing for customers and difficult for law enforcement to manage."